Inadvertent waivers of the attorney-client privilege and work product protection continue to vex both attorneys and clients in conducting and acting on internal investigations. Recently, Judge Marilyn Patel, in SEC v. Kent H. Roberts, case number 07-04580 in the U.S. District Court for the Northern District of California, ordered the production of certain attorney notes taken during an internal investigation of McAfee, Inc. and related presentations of the findings to McAfee’s Board of Directors and the government. (Mem. and Order, Aug. 22, 2008.) Judge Patel held that the use of and reliance on notes taken by attorneys constituted a waiver of the attorney client privilege and work product protection, at least as to those facts presented and to the extent that attorneys’ mental impressions and conclusions contained therein had been divulged. Although the privilege was preserved insofar as mental impressions and conclusions not deemed waived by disclosure and for communications with outside auditors, this recent opinion further draws into question the scope of waiver and the difficulty of preserving the privilege when conducting an internal investigation and thereafter communicating the results to others.
Amidst allegations of stock options backdating, McAfee formed a Special Committee of its Board of Directors, who in turn hired a law firm to conduct an internal investigation. The law firm interviewed at least 75 people, reviewed certain documents and e-mails, and ultimately presented its findings to McAfee’s Board of Directors, outside auditors, the Securities and Exchange Commission, and the Department of Justice. During these presentations, the attorneys orally answered questions and further discussed the findings as to certain individuals interviewed.
The SEC later brought civil charges against McAfee’s former General Counsel Kent Roberts (“the defendant”), stemming from the same issues investigated by the Special Committee and its counsel. In discovery, the relevant documents and e-mails analyzed in the investigation (numbering over 20,000 pages), a copy of the 236-page PowerPoint presentation made to the Board and to the government, and a list of all witnesses interviewed and their contact information were produced. However, the defendant additionally sought the court to compel production of attorney notes taken during the witness interviews, meetings and communications with the SEC and the DOJ, and meetings with McAfee’s Board of Directors and the Special Committee.
The law firm argued that the notes were protected by the attorney-client privilege and work product doctrine. Nonetheless, the court ordered production of (1) all documents provided to the government or Board of Directors; (2) all factual information disclosed to the government or Board of Directors in response to questions regarding statements made by certain witnesses; (3) all interview notes and summaries with respect to three particular witnesses; and (4) all notes of meetings or communications with the government or the full Board of Directors or any Board members not on the Special Committee, subject to redaction to protect the attorney’s mental impressions and conclusions.
Attorney Notes Ordered to be Produced
Despite arguments that attorney notes were protected by the attorney-client privilege and work product protections, many of the notes were ordered to be produced. The court ordered production even though (1) the law firm took meticulous precautions to create a PowerPoint presentation based only on non-privileged documents, (2) oral disclosures were limited to confirming factual information already contained in the PowerPoint presentation or in answering specific questions posed by the government as to what witnesses said about non-privileged documents, (3) any reference to the notes was made only to confirm or deny facts, and (4) the same witnesses interviewed by the Special Committee’s counsel were available to the defendant for deposition.
Nonetheless, the protections were preserved without exception only as to those communications with the Special Committee of the Board of Directors – the law firm’s actual client – and the outside auditors, who were held to share a common interest with the Special Committee and its counsel. The court noted the strong public policy reasons to encourage self policing by corporations, stating that sanctioning a broad waiver as to communications with the auditors would likely have a chilling effect on corporations’ internal investigations.
No such common interest or public policy considerations were found to apply to communications with the government or McAfee’s Board of Directors. Any information disclosed to them was found to effectuate a waiver of the attorney-client privilege, although the court did recognize and take steps to preserve attorney work product within the notes. Therefore, the notes of meetings with the government and the Board of Directors were ordered produced subject to redaction. Documents actually provided to these third parties had also lost their privileged character and were ordered produced.
On the other hand, the protections were generally preserved as to the handwritten attorney notes of witness interviews, which the court recognized were “classic attorney work product” (id. at 5). Nonetheless, if the attorneys’ mental impressions and conclusions had been disclosed to third parties, the protection had been waived. Thus, when an attorney in deposition described his impressions of the demeanor, credibility, and culpability of three particular witnesses, the protection was waived, and all interview notes and summaries with respect to such witnesses were ordered produced.
Further, “factual information” disclosed orally in response to questions by the Board of Directors and the government was to be produced. Because “the transmission of privileged information is what matters, not the medium through which it is conveyed,” the protections had been waived. (Id. at 8.)
The Scope of Inadvertent Waiver
The court did take some measures to maintain the attorney-client privilege and work product protection. For instance, although the opinion rejected the concept of “selective waiver,” stating that generally, information may not selectively “[be] disclose[d] to third parties while continuing to maintain the privilege against [the defendant]” (id. at 9), certain limits were imposed as to the reach of inadvertent waiver: “The nature of the legal advice sought here were [the attorneys’] conclusions and revelation of the same does not effectuate a carte blanche waiver” (id. at 10). Thus, even though notes of certain witness interviews were ordered disclosed, “the scope of the subject matter [did] not extend to all witnesses.” Id. at 13.
Internal Investigations, Cooperation and Privilege
Corporations and their counsel must be wary when conducting and presenting internal investigations not to inadvertently waive the protections of the attorney-client privilege and work product doctrine. In this opinion, the court noted that factors weighing in favor of disclosure of attorney notes of witness interviews included (1) reference to interview notes before releasing factual information to the government, (2) an admission by an attorney that the substance of some of the interviews had been disclosed, and (3) alleged disclosure of attorney work product in presentations to the government and the Board, because the attorneys “must have” disclosed their mental impressions and conclusions when discussing improprieties found in the internal investigation. While on balance, other factors outweighed disclosure of the majority of the interview notes, the fact that the court was willing to entertain these arguments as tending toward waiver of attorney notes may be cause for concern. For instance, as to the third factor, the court stated, “[the defendant’s] conclusion that mental impressions must have been revealed is not foregone” and noted that it was “possible, arguably even likely, that [the law firm] revealed its mental impressions and conclusions during its communications . . .” (id. at 19 (emphasis added)), illustrating how tenuous the protections may be when the results of internal investigations are presented to boards of directors or other third parties.
For a copy of the full opinion, click here.